Chapter 8 personal finance Mr. Cook
Federal agency responsible for collecting taxes and for the interpretation and enforcement of the Internal Revenue Code (Internal Revenue Service, Federal Deposit Insurance Corporation)
Internal Revenue service
Which statement is true about liquidity? The more liquid an investment, the more return The less liquid the investment, the less return The more liquid an investment, the less return Both A and B
The more liquid an investment, the less return
If you leave a job and have money saved in your employerʹs retirement plan, always roll that money into an IRA using a direct rollover, which allows you to avoid taxes and penalties. T/F
True
You can start investing with a small amount of money. T/F
True
The government agency responsible for regulating the stock market (Federal Reserve, Securities Exchange Commission)
securities exchange commission
Piece of ownership in a company, mutual fund or other investment (401k, share)
share
Securities that represent part ownership or equity in a corporation (stocks, bonds)
stocks
In some cases, employers will match the employee contribution, but you should fund your plan whether your company matches or not. This statement refers to: Single stocks Roth IRA Bond funds 401(k)
401 (k)
A retirement plan found in nonprofit organizations such as churches, hospitals and schools. GIC 457 401(k) 403(b)
403(b)
A savings plan operated by a state or educational institution designed to help families set aside funds for future college costs (529 Plan, Guaranteed Investment Contract)
529 plan
Employee benefits packages: Should not be a consideration when looking for a job Never include retirement plans Are the same regardless of the company you work for Are non-wage compensations provided to employees in addition to their normal wages or salaries
Are non-wage compensations provided to employees in addition to their normal wages or salaries
A young investor willing to take moderate risk for above-average growth would be most interested in: Single stocks Bonds Mutual funds Real estate
Mutual Funds
Which of the following is a good investment option? Gold Viaticals Mutual funds Futures
Mutual Funds
A list of your investments (bank statement, portfolio
Portfoilio
The benefit of diversification in your investments is: Reduced risk Increased return Reduced tax liability Increased risk
Reduced risk
Relationship of substantial reward compared to the amount of risk taken (risk-return ratio, investment strategy)
Risk-return ratio
To ensure that some of your retirement savings will not be subject to income tax upon withdrawal, you would contribute to: A 401(k) A Roth IRA An annuity A traditional IRA
Roth IRA
Distribution of a portion of a companyʹs earnings, decided by the board of directors, to a class of its shareholders (interest, dividend)
dividend
Good investment portfolios are extremely complex. T/F
False
If you get into financial trouble, borrowing against your retirement plan is a good option. T/F
False
Single stocks and mutual funds carry the same amount of risk. T/F
False
The purpose of war bonds is to finance military operations during war time. The last time the United States issued war bonds was during the Vietnam War. T/F
False
You should start investing as soon as you have your college education funded. T/F
False
Saving and investing have nothing to do with the amount of money you make T/F
True
Company Xʹs board of directors has decided to issue a portion of its earnings to its shareholders. If you own stock in Company X, you can expect to receive a(n): Investment Dividend Buy-out Yield
Dividend
A mutual fund portfolio that is properly diversified will have all investment dollars located in just one of four different classes of financial assets. T/F
False
Which of the following statements about the stock market is false? The terms bull market and bear market describe upward and downward market trends. The stock market is a generic term that encompasses the trading of securities. The Dow Jones Industrial Average is one measure of the stock market. Formed in 1792, the New York Stock Exchange (NYSE) is the smallest organized stock exchange in the United States.
Formed in 1792, the New York Stock Exchange (NYSE) is the smallest organized stock exchange in the United States.
Long-term investments, properly diversified, include the following mutual funds: Growth, balanced, international, bond Growth, growth and income, international, aggressive growth International, bond, aggressive growth, growth Growth, growth and income, bond, aggressive growth
Growth, growth and income, international, aggressive growth
Money markets are great for your emergency fund due to their liquidity and stability T/F
True
A savings account sold by an insurance company, designed to provide payments to the holder at specified intervals, usually after retirement. Money market Mutual fund Single stock Annuity
Annuity
Savings accounts and money-market accounts are most appropriate for: Long-term investments like retirement Earning a high rate of return Emergency funds and short-term goals Savings accounts and money-market accounts should be avoided since they carry high risk
Emergency funds and short-term goals
A reason that people need to save and invest is to: Enable their money to make money Increase the money supply Be able to get anything they want Have an opportunity to talk with financial service providers
Enable their money to make money Increase the money supply
When buying and selling investments, you should not: Switch your investment strategy often, based on market conditions Understand basic investment strategies and identify ones that will help you reach your goals Set your investment goals and consider a time frame Learn the different types of investments
Switch your investment strategy often, based on market conditions
Quality of an asset that permits it to be converted quickly into cash without loss of value; availability of money (risk, liquidity)
liquidity
Money that is invested, either tax deferred or tax free, within a retirement plan (tax -favored dollars, dividend)
tax -favored dollars